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Assistant to Mr. Mineta, Phyllis A. Guss; and Engagement Partner John D. Strom, Concurring Partner John F. Silton, ITAS Partner Brian F. Morse, and Engagement Manager A. Robert Bloom, all of Coopers & Lybrand.

At Mr. Acheson's request, Mr. Strom introduced his colleagues from Coopers & Lybrand and gave an overview of the fiscal year 1988 financial statements of the Institution. He said that Coopers & Lybrand's findings have led to the highest form of "clean opinion" for the Smithsonian's statements, that the Institution has used proper accounting practices and controls, and that the Smithsonian has complied with applicable Federal Laws. In comparing the fiscal year 1988 figures with those of the prior year, Mr. Strom pointed out that the increase in Smithsonian activities has been substantial.

Mr. Bloom outlined for the Committee Coopers & Lybrand's major findings and recommendations in their Report to Management. Weaknesses were discovered in the timely reconciliation of accounts between central accounting and the banks serving the Cooper-Hewitt Museum and the Tropical Research Institute; in inventory records; and in inventory procedures used by the museum shops, mail orders, SITES, Smithsonian Press, Cooper-Hewitt, and Freer/Sackler shops. Mr. Bloom also noted that the Institution continues to need a fully integrated purchasing and accounts payable computer system as well as an accurate property management system that will serve both property management and financial reporting needs. Finally, Coopers & Lybrand could not readily locate documentation which clarifies the provisions of and indicates the authority for special pension agreements drawn on behalf of several former Smithsonian officials.

In discussion which ensued Miss Leven described for the Committee measures which have already been taken with respect to these recommendations, including consultations with software vendors, reinforcement of operating procedures and directives, and the hiring of specialists as appropriate for the museum shops and accounting offices. The Committee specifically called for reports at their next meeting on (1) measures taken to improve banking relationships for the Cooper-Hewitt Museum, (2) enhancements to auxiliary activity inventory procedures, particularly those in the museum shops, and (3) confidentially presented documents including financial implications of the referenced special retirement agreements. As to (2) above, especially, members of the Committee felt that measures of energy and effectiveness must be pressed by the management to put this problem right.

Messrs. Bloom and Morse described for the Committee the review which Coopers & Lybrand conducted of the personnel-payroll system both on-site at the National Finance Center in New Orleans and at the Smithsonian. They noted a number of procedural weaknesses in timely communications, reconciliations, selected internal controls, verification of time cards, updating for personnel changes, and selected data processing procedures.

Concluding Coopers & Lybrand's presentation, Mr. Strom presented the final report on administrative and financial arrangements and procedures at the Smithsonian Astrophysical Observatory. This subject was explored in detail at the Committee's last meeting; the report confirms data given at that time.